[Federal Register Volume 64, Number 5 (Friday, January 8, 1999)]
[Notices]
[Pages 1178-1179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-377]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency


Temporary Suspension of Direct and Guaranteed Farm Ownership and 
Farm Operating Loan Programs To Construct Specialized Facilities Used 
for Hog Production

AGENCY: Farm Service Agency, USDA.

ACTION: Notice of temporary suspension.

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SUMMARY: The Farm Service Agency (FSA) is announcing a temporary 
suspension, effective on the date of this notice, of direct and 
guaranteed farm ownership and farm operating loan financing for the 
construction of specialized facilities used for the production of hogs.

EFFECTIVE DATE: January 8, 1999.

FOR FURTHER INFORMATION CONTACT: James F. Radintz, Director, Farm Loan 
Programs Loan Making Division, Farm Service Agency, 1400 Independence 
Avenue, SW, STOP 0522, Washington, DC 20250-0522, telephone (202) 720-
1632; email Jim__R[email protected].

SUPPLEMENTARY INFORMATION:

Background

    A specialized facility, hereafter referred to as a facility, is 
defined for the purposes of this temporary suspension as any building 
or enclosure and related equipment specifically designed to house, 
raise or feed hogs of any size, age, or market class.
    This action is necessary for USDA to adopt consistent policies to 
address the economic crisis in the pork industry. The Secretary of 
Agriculture has taken a variety of administrative actions to mitigate 
the current over-supply and historic low price conditions being 
experienced by hog producers. It is inconsistent with USDA policies for 
FSA to continue to finance construction of additional production 
facilities through direct loans and loan guarantees while other 
agencies within USDA expend resources to ameliorate over-supply 
conditions.
    FSA is concerned that during this period of low prices, the 
availability of its credit programs may facilitate additional 
production capacity that will prolong the current hog price depression. 
Additional capacity is also likely to damage the prospects for long-
term financial recovery in the industry. These results would be 
damaging to individual hog producers and the public interest. Without 
the moratorium, the effect will be increased Federal outlays as the 
time necessary for USDA amelioration of over-supply will be extended. 
Producers will experience continued severe financial stress and delayed 
financial recovery. Further, USDA is concerned that continued financial 
stress on hog producers may force and accelerate concentration of the 
production, processing, and marketing of hogs into fewer hands. Such a 
concentrated structure would result in a significant reduction in the 
diversity of agricultural production and in the independence of family 
farmers across the country.
    In many cases, a producer would be unable to obtain the required 
capital for new facilities were it not for FSA's direct and guaranteed 
farm ownership and farm operating loan programs. Loan guarantees limit 
the loss risk to commercial lenders up to 95 percent, while qualified 
applicants may receive 100 percent financing through the direct loan 
program. The current price levels for hogs ready for slaughter will not 
generate adequate cash flow to support new loans. However, through 
production contracts or other means, some loan applicants may be able 
to meet loan repayment requirements and qualify for credit for the 
construction of new facilities. The Agency is

[[Page 1179]]

particularly mindful that the availability of an FSA loan guarantee may 
induce commercial lenders to finance facilities that they would 
otherwise not consider viable under current market conditions.
    Direct and guaranteed loan applications that were received by FSA 
county offices on or before the date of this notice will be processed 
through to completion and will not be affected by this temporary 
suspension. Loan applications for purchase, refinancing, maintenance or 
repair of facilities currently in production will continue to be 
processed, as will loan requests for operating loans for annual 
production purposes. In all other cases, applications will only be 
processed when the government's interest will be imperiled. All other 
loan applications submitted to FSA county offices during the temporary 
suspension will be accepted but held in abeyance until the suspension 
is lifted.
    This temporary moratorium will be lifted upon determination by the 
Secretary that economic and financial conditions have improved to the 
extent that USDA action is no longer necessary to alleviate financial 
stress on hog producers.

    Signed in Washington, DC, on January 4, 1999.
Parks Shackelford,
Acting Administrator, Farm Service Agency.
[FR Doc. 99-377 Filed 1-7-99; 8:45 am]
BILLING CODE 3410-05-P